Bridport & West Dorset News, Views, Videos & Curiosities

“Uneconomic” to re-convert Three Cups in Lyme Regis to hotel

Editor’s Note: I find myself in something of a quandary over this story, because my wife’s firm Watershed PR is working with Palmers Brewery on The Three Cups. Anything I write about The Three Cups is therefore likely to be viewed as compromised in some way. I have thought a lot about this and decided – in this instance – to do three things – 1) report factual snippets from a presentation to journalists, for the purpose of breaking news (as earlier on Twitter), 2) reproduce word for word the text of Palmers’ press release, so that you can judge it for yourselves, and if you so wish, use it to assess what other journalists write, and 3) show some photographs of the inside of The Three Cups. I am obviously aware that the objectivity of photographs can be disputed, but not many pictures of the inside of The Three Cups can be seen online, and I think it is worth providing a dozen or so more.

AN independent consultants’ report into the viability of re-converting The Three Cups Hotel in Lyme Regis into a hotel has found that the costs of re-conversion are so large that the scheme is uneconomic. Palmers Brewery, which owns The Three Cups, will now consult widely with the local community to find a way forward for the site.

The report by TRI Hospitality Consulting examined two possible re-conversion plans: Option A was for a hotel within the existing building with 13 bedrooms, restaurant, bar and meeting room. Option B was a more ambitious scheme to preserve the historic front section of the building while demolishing and rebuilding the rear to include 20 bedrooms, restaurant, bar and meeting room.

The report concluded that the income likely to be generated from Scheme A would allow a maximum of £830,000 to be spent on the reconversion. Option A was estimated to cost £3m leaving a huge shortfall. The figures for Scheme B were similarly uneconomic.

Nigel Jones of Chesterton Humberts, property agents for Palmers, said: ‘Sadly the affordability gap is so huge that there is absolutely no hope of anyone realistically ever being able to afford to reconvert the building into a hotel. The gap is so large that even if it were somehow possible to halve the costs, re-conversion would still be economically unviable.

‘The re-conversion costs are so high not because the building has been unused but because it needs complete re-configuration to meet modern standards and customer requirements. Radical changes would be needed to room layout and facilities; it is not a case of simple refurbishment. The fact it has stood empty for 20 years has not contributed significantly to these costs.

‘We commissioned this report with an open mind because we wanted to find out what the options were. Now we have it, everyone needs to look forward. We are therefore going to consult with the community with the aim of finding proposals for the site that are both appropriate and economically viable.’

Key facts from report

Building occupies a premium site

Tourist season in Lyme Regis has steep peaks and deep troughs, with too much demand in summer and too little in winter, restricting income potential for hotels

Costs are huge: scheme A (reconvert with 13 bedrooms): £3m. Scheme B (some demolition and new build) with 20 bedrooms: just over £4m.

Shortfall on scheme A of nearly £2.5m

Shortfall on scheme B of £2.6 to £3m

TRI Hospitality Consulting

Independent consultants based in London with wide experience of hotel and hospitality industry. Clients include the largest hospitality and financial organisations in the UK. Also has significant experience in the South West.

Produces the largest full Profit & Loss database of full-service hotels across the UK and Europe.

More than 2,000 hotels (300,000+ bedrooms) supply performance data in absolute confidence.

Runs annual UK budget hotel survey, monthly full-service UK and Europe surveys and quarterly confidence monitor.

TRI’s instructions from JC & RH Palmer Ltd

“…you wish to achieve a development which is appropriate for the town and the site and you require an independent assessment of the market and financial viability of the restoration of the Three Cups for hotel use.”

Other consultants involved in project

Davis Langdon, Chartered Quantity Surveyors, Southampton office; Archial Architects Ltd, Bournemouth

11 Responses to ““Uneconomic” to re-convert Three Cups in Lyme Regis to hotel”

  1. Claire

    Let Palmers put the building up for sale & let the market decide on its viability as a business. I just do not believe that there is little call for hotel rooms year round in Lyme Regis; Bridport’s Bull Hotel seems to be doing OK; they are converting store rooms to accommodation to meet increasing demand for rooms in the locale.

  2. Banjo

    Mark Hix has expressed an interest in returning it to a hotel – and he’s no fool. He has a destination restaurant – similar to that of Rick Stein (who also runs a hotel in Padstow). Indeed the problem may be that because there isn’t enough accommodation in the town people are put off going there.
    If it was built they will come. The historical associations alone would guarantee interest (even if the guests came dressed as hobbits).

  3. Sara Hudston

    I think it’s important to point out that the issue with returning the Three Cups to a hotel is not the level of room bookings but the massive cost of the reconversion work necessary. According to the findings in the independent consultants’ report, you could fill every room every night of the year for the next 15 years and still come nowhere near raising the income to pay for the £3m+ needed to reconvert it into a modern hotel. Anyone who wants to read the full consultants’ report is very welcome to download it from the Watershed online newsroom – visit select Palmers and then ‘Useful Stuff’.

  4. Incredulous

    Little call for rooms years round in Lyme Regis? Oh, come on! It is NOT a ‘bucket and spade’ resort, it is a year round resort – not only the Jurassic Coast tourism but the people from abroad such as the Tolkien and Jane Austen fans – they don’t just come in the summer! The average spend in Dorset is high because of the kind of place it is and the type of people who visit. Proper targeted marketing and PR will bring them in to the 3 Cups!

    The ITV news report said that Palmers closed the hotel because it needed modernisation – why was this not done at the time rather than left to rot for 20 years? Why has WDDC never done anything about it? Why did the Listed Buildings people never take it up? Why has Lyme Town Council apparently done little or nothing over the years? It seems that Palmers will probably be REWARDED for blighting the town!

  5. I beg to differ...

    Thanks Sarah, I’ve had a quick rough look over the TRI report and want to respond to what you said:

    “According to the findings in the independent consultants’ report, you could fill every room every night of the year for the next 15 years and still come nowhere near raising the income to pay for the £3m+ needed to reconvert it into a modern hotel.”

    Can you point us exactly to where the report makes this conclusion?

    Further – the report isn’t independent – it was commissioned by Palmers.

    Secondly – TRI have used their own database “Hotstats” from which to project expected occupancy levels and room rates. By their own admission, their database is based on a sample of hotels across the UK. Its unclear how much TRI took into account the local tourist climate when determining expected occupancy and room rates. The point here is that the numbers used by TRI cannot be independently checked and must therefore be used with caution.

    Now, without spending hours on the calculation, I just wanted to check Sarah’s statement that “you could fill every room every day of the year for 15 years and come nowhere close…” – OK, let’s make it easier and do some very rough calculations based on the imaginary 100% occupancy.

    average room rate = £80 a night
    number of rooms = 20
    365 days a year
    gross profit for 1 year = £584k

    COSTS (taken from p58 of the report)
    Assuming 55% average occupancy the total running costs are £172k. Almost doubling the occupancy is not going to double the costs, so let’s take the quoted cost of room (£34,300) which means total costs of approx £205k per annum.

    Therefore, a net profit of £379k a year. For ease of calculation let’s assume that’s the same year on year for 15 years – a total net profit of £5.685M

    These numbers don’t even take into account profit and loss from the catering side of the business.

    If my rough calculations are anywhere near accurate (and you’re all welcome to correct them), a 100% occupancy of the redeveloped 3 cups would generate a total net profit of £5.685M over 15 years. Given that the initial outlay is quoted at £3.6M, that’s a total gain of approximately £2m, notwithstanding the potential profit from increased property prices. Even if the cost of borrowing were to skyrocket, that looks like a healthy return on investment, if you ask me.

    The TRI report itself, as far as I can tell, doesn’t make any mention of the potential viability of the project assuming 100% occupancy. Sarah seems to have invented her own conclusion… but i’m happy to be stand corrected.

    Finally, I would like to question the scope of TRI’s report. There doesn’t seem to be much flexibility in the projections. What if the hotel were to be 5star-rated with a top class restuarant? Why not answer the question “How could the hotel be re-built in order to make a reasonable return on investment?” I think that’s the question the people of Lyme Regis want answering. Me thinks they’ll have to commission their own report to counter-balance the one commissioned by Palmers…

  6. Sara Hudston

    Dear I beg to differ…

    Thank you for your questions addressed to me. In reply to your points:

    The report says that there is a market opportunity for a hotel on that site. It gives a highly informed picture of the amount of profit it would generate and then sets that against the costs of reconversion. The report considers two reconversion schemes, one with 13 bedrooms costing approximately £3m and one with 20 bedrooms costing approximately £4m.

    The report was commissioned by Palmers, from TRI Hospitality Consulting, whose knowledge and judgement is well reputed in the hotel industry. Given that the report cost a five-figure sum, Palmers was the only body involved in the Three Cups with the funds to pay for it at that time. If, in your view, the fact of paying for the report compromises its independence, then who can commission a report that will be regarded as independent?

    TRI’s HotStats database is the industry-recognised benchmark.

    The report itself does not say that you could fill the rooms every night for 15 years and still not bridge the gap between revenue and reconversion cost; this was my extrapolation from the report and I would like to explain this in more detail.

    Regarding the occupancy and income figures, there are several points to untangle. First of all, those in the hotel trade say it is completely unrealistic to imagine you could ever achieve 100% occupancy. However fabulous and well located, boutique hotels in the regions will all suffer the ‘wet Wednesday night in November’ syndrome, when trade is thin. Secondly, the figures you present have mixed two categories. You have worked on a basis of 20 rooms and a cost of £3m – the £3m relates to the cost of 13 rooms. For 20 rooms the reconversion cost is nearly £4m. Also, you have taken an achieved average room rate of £80, but this is not the case for the first two years when it would be £77.01 and then £78.67.

    If we work with the first year figure of £77.01, you would generate £365,412.

    I have spoken to TRI, who calculate that operating costs would reduce this income to a gross operating profit of £136,200. From this lower sum you would then have to deduct all your fixed costs, such as insurance and business rates. Furthermore, TRI say your payroll would rise significantly to cope with the increased occupancy rate, so you would have to deduct this again from the bottom line. It’s almost impossible to produce an exact figure, but you can see immediately that even with £136,200, (which is not the final figure), you would be unable to generate the £3m cost within a commercially viable timescale. Certainly not within the 15 years that I spoke of.

    Finally, the report identified the market opportunity that TRI felt was appropriate. They did this using their knowledge and judgement, which is widely recognised within the hotel industry.

  7. Incredulous

    Re: prospective room rates – £80 per night is remarkably cheap! Have you looked at up to date rates? Many B & Bs charge more than this in West Dorset! Therefore a hotel of the calibre of the 3 Cups, together with its position, could easily charge more – and get it! And don’t forget that tourism is UP in West Dorset and still rising.

  8. sally-jane emm

    Well if they are only going to charge £70 per nite approx, I shall live there permanently at that price.
    Any fool can see the raw base data was flawed to say the least, and after doing simple calculations that a teenager could manage with a few phone calls, the average price predicted for 2012, (on which TRI Consultants based their figures) of £70 per nite is wrong. The predicted result from contacting numerous 3-5 star beach hotels in a similiar location averages out at £100-£200 per night and suites range from £250-£650 per night dependent on size. Put that raw data in their programme and you end up with a net result of £2m profit over 15 yrs at 95% filled at a yr round resort at a 10% annual increase. Not bad really when you look at it in the light of day.

  9. Sara Hudston

    Just to repeat my earlier comment – even if the hotel made a profit of £2m it still would not be enough to bridge the gap of the re-conversion cost.

  10. Glen Herbert

    On 4th April 1974 during the local government transition the former borough of Lyme Regis ended and its assets were divided into 53 packages to be transferred to the National Archives, the newly formed West Dorset District and Lyme Regis Town councils. All these assets can be accounted for except Package 37 which is missing! and contained many land and property deeds that belonged to the former borough. These deeds filled up a back room of the former solicitor firm Roper & Roper, some were later past on to the national archives known today as the Roper Deeds. It’s easy to find out which are still missing by applying for a Historical Certificate (HC1 form) from the Land Registry (Weymouth Office) and you will discover most properties in Lyme Regis officially never existed prior to 1974 because the deeds prior to this time are the missing borough assets. I believe that falsifying or knowingly holding a falsified deed is fraud and the culprit can expect anything up to a ten year prison term!

    I was a boatman at the Cobb and have recently been on my own campaign to save the Cobb as a commercial seaport as I have a passion for its history and wish to preserve a piece of our heritage. In the last two years I noticed that those trying to save the Three Cups Hotel in Lyme are being lead down the same ‘blind alley’ as I had. Ownership of the Cobb is the same as the Three Cups (not Palmers Brewery) with many other properties and land throughout Lyme that belonged to the former borough council. This is all public/government property not any individuals. Evidence for this ‘Property Scam’ can be obtained from a copy of the Drayton survey of borough property at the Dorset History Centre, Dorchester (DC/LR/K/4/1). This would you believe is only part of the missing property and a careful examination of the remaining Roper deeds (D/LRM/A6) with further historical evidence and local knowledge that I have obtained will show more.

  11. Claire

    I’d love to know more from Mr Herbert, and also what the implication is regarding the Three Cups – do Palmers actually own it after all this???? Are we being subjected to some smoke & mirrors skullduggery? All I can imagine is that this will run and run as long as Palmers are prepared to hold out for residential conversion. Their empty property portfolio is increasing all the time – my own village of Maiden Newton now has a derelict building courtesy of the brothers. The real question is: who will blink first – Palmers or the Council??

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